The Point On Washington

About The Point On Washington

Favorable Equity From The City In-Place

The City of Madison provided $1.5 million across two notes to support the property’s conversion from hotel to apartments. The current $1.4 million balance carries exceptionally attractive terms, including no required debt service and $650,000 to be forgiven over the next 13 years. The remaining $750,000 is deferred until a future sale, upon which time it would have profit participation equal to a small share (currently 3.31%) of the property's appreciation. With city approval, these notes may be assumable at sale. In exchange, the property carries a LURA requiring 85 units at 60% AMI rent restrictions. Given the high AMI for the area, the current asking rents, including RUBS, on average $340 below the limit threshold representing strong potential growth.

Severe Lack of New Construction Affordable Housing

There is a disparity between low-income households and affordable housing units in the broader Madison area and the Northeast Madison submarket. Considering a 3-mile radius from the property, there are over 6,000 one and two person households that fall below the 60% AMI threshold, while there are only 640 affordable and one-bedroom units.

Post Stabilization Upside

During the initial lease-up period for the asset, there was significant construction activity on two out lots directly in front of The Point creating access and visibility issues during that vital time. Over the last 6 months, operations have greatly improved, displaying the property's upside through more effective, hands-on management.

New Construction, More Than Affordable

The 180 studio units at the property offer a 23% discount to the average studio rent in the submarket, and a 30% discount to the average of the other new construction studio units in the submarket. The property's amenities and upgraded units also provide a competitive advantage over the rent comp set, where rents are 7% higher than at POW.

Lower Real Estate Tax Exposure

There is likely minimal post sale reassessment risk based on the current fair market value and the potential pricing of the asset, which will be a fraction of today’s replacement cost, especially for a renovated community.